San Diego

Owner-occupied industrial deals are growing in San Diego. In 2019, owner-occupied industrial transactions hit record highs, and with growing demand from this user segment, the trend is expected to carry into 2020. Most of these deals involve owner-users selling industrial properties to an investor in a sale-leaseback transaction.

"Owner-occupied properties set historic record high sales prices per square foot across North County in 2019, which then led to several sale-leaseback transactions," Chris Baumgart, an SVP at JLL, tells GlobeSt.com. "Many longtime owners have seen the market as an opportunity to sell their properties only to then directly lease them back from the new buyer, granting access to the equity from the sale to reinvest back into their business elsewhere."

Baumgart expects the trend to continue in 2020, especially as leasing demand continues to grow and investment opportunities are slim. Overall, industrial deals both for owner-users and industrial investment should continue to outpace 2019. "This trend will likely continue in 2020. As for investors, current leasing fundamentals point to a pace of continued growth as we head into 2020," he says. "Thanks to the steady increase in total tenant requirements of 6.6 million square feet countywide, 41% focused in North County."

New construction activity, or rather the lack of new construction, will help to fuel overall investment activity in San Diego as well. There is simply a supply shortage in the market, and with little opportunity for new development, leasing demand is poised to outpace supply. "In the post-recession era, 2018 had the highest rate of new deliveries which dropped by -77.8% or 1.7 million to 393,000 square feet," adds Baumgart. "The continued strength in leasing fundamentals coupled with minimal new construction expected to be delivered to the market in 2020, investors will see a steady tailwind as activity tenant requirements are absorbed in the market."